This invention relates to methods and systems for leasing equipment, and particularly to sales and use tax optimization.
Each taxing authority has different laws and rules for sales and use tax on leased equipment. Some authorities impose tax at a particular percentage of the lessor's acquisition price, others impose tax on the value of a lease which is written in the authority's jurisdiction, others impose tax on the first time the equipment is leased in the authority's jurisdiction, and some authority's have varying rates if the vehicle is leased for varying terms. With some authorities, the tax is based on the depreciated value of the equipment, and with some authorities the tax is not due if the equipment is greater than a certain age.
For leasing companies which own large numbers of equipment which are of moveable nature, e.g., automobiles, trucks, trailers, modular buildings, and tractors, calculation and payment of use tax to the appropriate taxing jurisdiction at the appropriate time so as to avoid penalties and to avoid duplicate payments or over payments has been a manual process which is very time consuming, complex, subject to many sources of error, and often results in penalties from the taxing authorities due to late payments. Many of the taxing authorities allow the leasing companies to determine the tax due, subject to later auditing by the tax authority, and so it is important for the lessor to calculate the tax correctly the first time to reduce the risk of penalties.
Leasing companies have recognized that significant savings in sales and use taxes may be possible if their leasing activities are optimized with respect to equipment and taxing jurisdictions. For example, if otherwise equivalent articles are available to lease but with different sales and use tax consequences, great savings may be possible by choosing to lease the articles to incur the least taxes.
To date, no systems have become available for leasing companies to effectively systematize their sales and use tax optimization activities.